A validator runs a node that proposes and confirms blocks on a proof-of-stake network in exchange for staking rewards, and often stakes on behalf of others for a commission.
Rewards are ordinary income at fair market value when received under Revenue Ruling 2023-14. A validator operating as a business reports on Schedule C, owes self-employment tax, and deducts hardware, hosting, and electricity. Commissions from delegators are also income.
The business-versus-investment question decides the tax rate and the deductions, and slashing penalties may be deductible losses for a business. Staking rewards.
IRS crypto audits and letters, unreported years, theft loss opinions, and returns that survive an audit.
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